Expo 2020: What the win means for Dubai

On Wednesday, 27th November, Dubai marked a turning point in its history. Beating out competition from Brazil, Russia and Turkey, the Emirate became the first Middle Eastern nation to have won the bid to host the World Expo in 2020.

Back in 2010, when China hosted the same 6-month Expo, that event attracted 73 million people and drew participation from 192 countries. Running the event cost US $1.89 billion, and it raked in profit of $158 million. According to Chinese media reports, the total expenditure for this Expo was $58 billion. Operating profit was $164 million. More than these numbers, however, it was the sheer magnitude of economic and cultural development and job creation that made the event such a watershed.

Dubai’s upcoming Expo, meanwhile, is slated to attract almost 25 million people between April and October 2020, and authorities say total financing for the 6-month event will cost US $8.4 billion.

Today, even as the print and online media erupt with articles and posts congratulating Dubai, it’s time to examine what this win will mean for you, the expat professional. Here’s taking a look:

Financial impact: The big picture

The UAE is one of the fastest-growing economies in the world. Nominal GDP in 2012 rose by 21% to reach $360 billion, compared with $298 billion in 2011, and the country boasts rich resources in natural gas and petroleum, while also achieving growth in construction, transportation, ICT, and international trade.

With $11 billion fiscal surplus in 2011, the UAE is the top trading economy in the Middle East. The Emirates have invested heavily in infrastructure such as transport, connectivity and ICT. Last year, over 57 million visitors entered the UAE and by 2015, the country expects to have the world’s largest international airports in terms of footfall.

Where the Expo is concerned, Bank of America Merrill Lynch stated last month that the Dubai government is likely to provide US $6.8 billion in capital spending and $1.6 billion in operational costs for the event. This financing will “probably” be done via short-to-medium-term overdraft facilities. If you include private sector projects, spending would touch $18.3 billion, while the total financial impact is estimated at $23 billion – equating to an annual 3.5% of GDP. To place this in context, Dubai’s economy is worth $90 billion and the Dubai Financial Market has already risen 85% so far this year.

More jobs, better salaries

A MEED report said the Expo is expected to generate more than 277,000 jobs across sectors like construction, hospitality, aviation and electricity. Travel and tourism is likely to be a big gainer, with 40% of the new jobs going to that sector. In the hotel and restaurant sectors, 111,000 new jobs will come up.

Of course, more jobs mean more expats – and Dubai is no stranger to diversity, with 95% of the current population already comprising expats. This influx will have a ‘multiplier effect’ on the economy and boost the GDP, at the same time raising the overall quality standards and productivity of the workforce.

Accordingly, the telecommunication sector, ICT and transportation, will profit due to higher demand from international visitors. In fact, it is estimated that for every employee directly working for the Expo, there will be 60 additional jobs created in the wider economy. This impact will reverberate across the Middle East region. Education facilities will improve and increase, as will healthcare.

And it is not only jobs that will increase; salaries too are slated to rise. As living costs escalate, companies are likely to go beyond the current increments of 5% per annum.

Construction, everywhere

Dubai is home to some of the most well-known landmarks on the global map. Such ambitious projects will now gain steam, increasing in number – and in scale.

In the first half of 2013, the property and construction sector contributed as much as 21% of Dubai’s GDP growth. This, at a time when Business Monitor International put the value of UAE’s construction industry at ~$41 billion in 2013 alone. Surveys reveal that Dubai and Abu Dhabi have always been favorite destinations for construction industry professionals.

More than ever now, Dubai will become the nucleus of growth and development in the Middle East. The Emirate already has remarkable infrastructure, but it is in no way prepared to handle such a staggering influx of people.

Getting around gets easy

Work on the Dubai Metro Purple Line project is likely to speed up, as is activity on Dubai World Central where the actual Expo is to be hosted. In June, the transport authority said it planned to expedite construction of a $1.4 billion extension to its metro rail line. Also, expansion of the airport will boost air transport and road networks and public transport too will improve.

Real estate boom

In the past 12 months, apartment prices in Dubai rose 20%; the stock market has gone up 79% this year. Investors are already making a beeline to get a piece of the action in Dubai’s real estate market. As expat professionals move in to take up new job roles, property sale-purchase transactions are likely to rise, as is demand for home rentals. Business travellers will require facilities such as serviced apartments, and areas close to Dubai World Central will see frenetic development, with prices likely to escalate quickly.

Property developers are looking at residential and hotel projects around the Expo site in Jebel Ali, which is near Dubai’s new airport and the third busiest port in the world. With 70% of all Expo visitors coming from outside the UAE, there is a need for 45,000 new hotel rooms to be added.

ICT

From 2003 to 2010, ICT spending in the UAE grew at a CAGR of 19% to touch $12 billion. Between 2013 and 2015, spends are expected to touch $40 billion, with $30.4 billion spent on communications. Thanks to network and infrastructure upgrades to accommodate fiber optic connection and LTE mobile connection, the region is seeing rapid growth in this sector.

Expo 2020 will only accelerate this growth, driving companies to invest and earn rewards in one of the fastest-growing ICT markets in the world. 20 years ago, the UAE had zero Internet penetration. In 2012, it is at 85%, ahead of the US, Japan and South Korea. In mobile subscriptions, too, the country leads, with almost 170 subscriptions per 100 inhabitants in 2012.

Expos of the past – effects & impact

Did you know that the Eiffel Tower, the telephone, ice cream and Heinz Tomato Ketchup were all created for various World Expos?

First hosted in London in 1851, World Expos are among the oldest international events, and often, the largest gathering of people on the planet. Over time, the Expos have evolved – through the eras of industrialization and of nation-branding, to modern times when the impact is as much economic as cultural. In the past few years, Expos have been used to showcase new inventions, even to showcase a city or region to prospective investors and tourists.

Individual countries have had different experiences of hosting – and participating in – these Expos. The 1967 Expo in Montreal, Canada, proved a turning point for the city’s infrastructure development. The Décarie autoroute and the Louis-Hippolyte Lafontaine Bridge and tunnel came up during that time.

On the flip side, the 2000 Expo in Hanover, Germany, was expected to draw 40 million visitors but could not do so, thus sparking a financial deficit of $600 million. In terms of direct and indirect macro-economic effects, however, the benefits for Germany amounted to $7.3 billion! Besides, the Expo Plaza is today Hanover’s new centre of technology, design and arts.

Milan, which is where the 2015 Expo is to be held, projects an investment of $1.7 billion in hosting the event.

Participating nations too stand to benefit by being in the Expo. For instance, the Dutch Pavilion at Expo 2000 cost $47 million, but is estimated to have generated ~$470 million in indirect long-term benefits for the Dutch economy.